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Physician Pc Operating Agreement document sample
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Federal courts tackle
physician recruitment not constitute fraud, because it lacked the
requisite intent to deceive.
agreement disputes The surgeon further alleged that the
recruitment agreement was illegal under the
By Gary W. Herschman, Esq. and Alexandra Miller Khorover, Esq.
Anti-kickback and Stark Laws, and that he
Editor’s note: Gary W. Herschman is Chair salaries of support personnel and the cost of was, therefore, constructively terminated for
of the Health and Hospital Law Practice equipment; and (b) the group agreed to recruit refusing to sign an illegal agreement. The
Group at Sills Cummis Epstein & Gross a cardiothoracic surgeon to staff the program, court examined the terms of the physician
PC. Alexandra Miller Khorover is an As- who would be required to enter into a physi- recruitment agreement, and found that it was
sociate in the Group. Mr. Herschman may cian recruitment agreement with the hospital legal because: (1) it substantially complied
be reached at gherschman@sillscummis.com pursuant to which the hospital guaranteed the with the anti-kickback safe harbor for physi-
or 93-643-83 and Ms. Khorover may surgeon’s compensation for three years. cian recruitment agreements (the agreement
be reached at akhorover@sillscummis.com met all of the requirements, except that it was
or 93-643-481. Subsequently, the group recruited a qualified not located in a health professional shortage
surgeon and entered into an employment area (HPSA); and (2) it satisfied all require-
E
arlier this year, two federal courts agreement with him. However, due to a mis- ments of the Stark Law’s physician recruit-
decided two separate lawsuits communication between the hospital and the ment exception. Thus, the surgeon lacked a
involving physicians who attempted group, the surgeon was not informed about basis for his constructive discharge claims.
to evade the terms of their physician recruit- the need to sign a physician recruitment
ment agreements with hospitals. In both agreement prior to executing the employment Finally, the surgeon brought a tortuous inter-
cases, the courts upheld the right of the agreement. When the recruitment agreement ference claim, alleging that the hospital’s re-
hospitals to enforce the physician recruitment was presented to him, approximately four fusal to pay the group certain of its operating
agreements in the event of a breach by the months later, the surgeon refused to sign expenses in the absence of a signed recruit-
recruited physicians. it. unable to reach a satisfactory agreement ment agreement improperly interfered with
with the group and the hospital, the surgeon the surgeon’s employment relationship with
These cases are significant because they dem- resigned and sued the group and the hos- the group. The court rejected this argument,
onstrate the importance of drafting compli- pital for monetary damages, alleging fraud, ruling that the hospital was required to refrain
ant physician recruitment agreements and, wrongful (constructive) discharge, breach of from making any payments unless and until
in particular, of enforcing their terms in the contract, and tortuous interference with an the recruitment agreement was signed. To do
event of a breach. Set forth below is a brief employment relationship. otherwise would have constituted a violation
description of the two cases, followed by a list of the Anti-kickback and Stark Laws, and
of practical recommendations for hospitals to The surgeon argued that he was fraudulently would have subjected the hospital to potential
ensure ongoing compliance and to avoid the induced to sign the employment agreement penalties and liability.
types of liabilities and defenses asserted by because of the failure to inform him about
physicians in these types of cases. the physician recruitment agreement and the As a result, the physician’s action was dismissed
terms of the Exclusive Services agreement in its entirety. The dismissal was affirmed by
the cardiothoracic surgeon prior to his employment with the group. The a federal appeals court and recently denied
A cardiothoracic and vascular surgery group court agreed that the group had a duty to review by the united States Supreme Court.
in Ohio entered into an Exclusive Services disclose the terms of the Exclusive Services
agreement with a nearby hospital to establish agreement and the existence of the recruit- the OB/GYN recruit
an open-heart surgery program. To ensure ment agreement, because this information An OB/GyN group in southern California
economic viability for the new program: (a) the was material to the physician’s decision to recruited a physician to work at its practice.
hospital agreed to pay certain operating expenses become an employee of the group. However, As a condition of employment, the physician
of the group related to the program, including the court ruled that the group’s conduct did was required to enter into a relocation agree-
January 2007
Health Care Compliance Association • 888-580-8373 • www.hcca-info.org
ment with an area hospital that was affiliated challenge the terms of physician recruitment area or otherwise violates the agreement, all
with Tenet Healthcare Systems. under the agreements when deals fall through. To avoid ancillary payments under the related agree-
relocation agreement, the hospital agreed to the types of claims and defenses asserted by ments must cease until the dispute with the
pay the physician’s relocation and market- physicians in these cases, hospitals should physician is settled, or if permitted under
ing expenses and made certain collection consider the following recommendations: the terms of the agreement, until a substitute
guarantees. In return, the physician agreed 1. Draft compliant agreements. Physician physician is recruited in his or her place.
to maintain a full-time practice within the recruitment agreements that comply with the
hospital’s service area and to maintain privi- provisions of the relevant Stark Law excep- 6. Enforce the terms of the physician
leges at the hospital for at least three years. If tion and Anti-kickback Law safe harbors are recruitment agreement. If the recruited phy-
the physician terminated the agreement early, unlikely to give rise to liability. Physician sician violates the terms of the agreement, the
the hospital could recover as liquidated dam- recruitment agreements and accompanying hospital must seek to enforce its terms and
ages all amounts it paid to the physician. documents should be reviewed by outside recover prior payments. Failure to do so could
legal counsel before being presented to the potentially be viewed as illegal remuneration
upon execution of the agreements, the physician, and prior to making any modifica- in exchange for referrals from the physician
physician relocated from Pennsylvania and tions. and/or group practice.
the hospital paid $86,500 under the reloca-
tion agreement. The physician automati- 2. Maintain an open flow of communi- Conclusion
cally turned over this amount to the group cation among the hospital, the group Physician recruitment arrangements present
practice, as required by her employment practice, and the recruited physician. an excellent opportunity for hospitals to work
agreement. Approximately one year later, the Physicians who are aware of all the provi- collaboratively with physicians and group
group practice terminated the physician. She sions of the physician recruitment agreement practices, and at the same time, to enhance
briefly sought alternative employment in the and any ancillary/related agreements will be the availability of medical services to the
hospital’s service area, but eventually decided less likely to use compliance issues as a basis community. By working closely with the phy-
to return to Pennsylvania. for asserting employment-related claims or sicians and group practices, and by taking the
for defending lawsuits seeking the return of time and care to draft compliant agreements,
The hospital filed an action to recover the recruitment payments. hospitals can help protect their interests in
$86,500 that it had paid to the physician. the event that the terms of the agreements are
The physician argued that the hospital could 3. Execute all agreements simultaneously. not being followed, or if the agreements need
not enforce the relocation agreement because Work with the group practice to ensure that to be terminated for any reason.
it violated the Anti-kickback Law. As evidence all related physician recruitment documents
of illegality, she cited a recent OIG settlement are presented to the recruited physician and The views and opinions expressed in this
where various other relocation agreements signed contemporaneously. article are those of the authors and do not
involving Tenet hospitals were found to have necessarily reflect those of Sills Cummis
violated the Anti-kickback Law. However, 4. Monitor the agreement. The physician Epstein & Gross P.C. ■
the court held that this evidence alone was recruitment agreement and all related docu-
insufficient to support the physician’s claims, ments should be reviewed periodically to
ruled in favor of the hospital, and required ensure ongoing compliance.
the physician to return the money. Correction
5. Cease payments to the group practice Please note that the December 2006 Com-
Practical recommendations if the physician recruitment agreement is pliance Today omitted Lourdes Martinez,
These two recent court decisions demonstrate breached. Any payments made to the group Esq., Partner, Garfunkel, Wild & Travis,
the importance of drafting compliant physi- practice pursuant to recruitment arrange- P.C., as one of the authors of “What every
cian recruitment agreements. Physicians are ments are illegal unless a valid physician compliance officer needs to know about
becoming more aggressive in using the fraud recruitment agreement is in place. If the the Deficit Reduction Act of 2005”.
and abuse laws in the courts as a means to recruited physician leaves the hospital’s service
January 2007
Health Care Compliance Association • 888-580-8373 • www.hcca-info.org
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